Guatemala executed a loan application for US$430 million, equivalent to Q3,289 million, to face any type of natural disaster. Financing with multilateral banks is pending for the Executive to send it to the Congress of the Republic for information.
This is a public credit operation that has already completed the process of opinions and opinions of the Secretariat of Planning and Programming of the Presidency (Segeplán), the Ministry of Public Finance (Minfin) and the Monetary Board (JM).
The file is in the General Secretariat of the Presidency to be transferred to the Legislature and submitted for approval. That is, it is in its last phase. Because it is a sovereign debt, it must be known by the Legislature.
The official information was released yesterday during the presentation of the open budget days for 2027.
Guatemala seeks credit in the face of disasters
The operation consists of a Catastrophe Deferred Disbursement Option (CAT-DDO) of the World Bank, based in Washington DC
This mechanism groups flexible and immediate credit conditions to access the approved amount, either in its entirety or partially in tranches, once a natural disaster occurs and a state of Calamity is declared.
In addition, it was explained that, after approval by Congress, the resources could be available within 24 hours in the event of an emergency or natural disaster. The mechanism offers favorable conditions and can also function as a revolving fund to cover eventualities arising from natural phenomena.
If known and approved by Congress, this would be the third time that Guatemala uses this emergency line of credit. The first was due to the rains and damage caused by Tropical Storm Agatha and the eruption of the Pacaya volcano at the end of 2010; the second, during the health emergency due to covid-19 in 2020.
Credit would support disaster response
The undersecretary of Segeplán, Hugo Allan García Monterrosa, in charge of the Strategic Development Analysis area, explained the basis of this credit operation when asked about the effects that climate change and the prolongation of the drought associated with the El Niño phenomenon could have at the end of the year and in 2027, as well as the reaction of the Government Cabinet.
The official assured that climate shocks tend to have two main effects: a slowdown in economic growth and, in some cases, a reduction of up to 1% of the gross domestic product (GDP). This impacts productive activity and income, which means fewer resources to respond to emergencies.
“We have pre-approved a deferred loan for emergency cases that would allow us to have liquid resources to deal with this type of catastrophe. It is the third operation of this type that has been worked on with the World Bank,” emphasized García Monterrosa.
The undersecretary indicated that the file of the public credit operation is now ready to be transferred to the Congress of the Republic and known in the event of an eventual emergency, which would make it possible to have liquid resources to deal with any contingency.
“We have pre-approved a deferred loan for emergency cases that would allow us to have liquid resources to deal with this type of catastrophe. It is the third operation of this type that we have worked on with the World Bank.”
Hugo Allan García Monterrosa, Undersecretary Segeplán
He added that there are already technical analyzes prepared by the National Coordinator for Disaster Reduction (Conred) due to the presence of tropical storm Cristina, as well as for slowly evolving phenomena, such as drought. Although its effects are not immediate, affected communities experience impacts on food production with long-term repercussions.
In this regard, he reiterated that early warnings are maintained to act in a better way. He added that This issue has been addressed in the General Cabinet so that institutions incorporate into their planning guidelines aimed at preventing the effects of these phenomena from reaching the population, especially the most vulnerable..
They promote preventive monetary support
The undersecretary also explained that they are working on conditional monetary transfer initiatives in the event of natural phenomena, in order to reduce their effects on the population.
As an example, he indicated that, when the impact of a phenomenon such as Tropical Storm Cristina is expected, communities could receive a monetary transfer before the emergency occurs. That way, they would have resources to address their immediate needs, since response costs increase considerably after the event.
He added that the project is already in development and that models are available to execute it on a pilot basis in the beneficiary communities.
The support, he explained, would be channeled through the Ministry of Social Development (Mides). The amount would be Q500, although it would depend on the phenomenon that occurs. He recalled that during the pandemic the contributions ranged between Q3 thousand and Q6 thousand, distributed over several months, depending on the magnitude of the emergency and based on technical calculations.